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Should I Hire a Tax Professional?

Small business owners are a favourite target of CRA because, generally speaking, they have limited knowledge of tax legislation and are anxious for CRA to move on to someone else. When faced with an audit, a small business owner can: 1) accept and pay whatever re-assessment is made by the auditor; 2) defend themselves against CRA with appropriate justifications and rationale; or 3) hire professional tax representation to do the heavy lifting for them. Let's look at the reasons for when and when not to consider hiring professional representation.

Overall tax bill

The cost associated with retaining a tax lawyer or a company that offers tax audit representation will generally run you a minimum of $5,000. Furthermore, this amount does not typically include the cost of any court appearance, should they be required. Many small business owners will weigh the cost of representation against their tax bill, perform an intuitive risk-vs-reward analysis, and decide that it simply isn't worth it. After all, if you're looking at a tax bill of $5,000, it is quite easy to reason that if you pay $5,000 for representation, the best you can hope for is that you will win on all counts and still end up paying the exact same amount. However, if the amount of your reassessment by CRA is much higher (say, $10,000) than the amount you are quoted for professional representation (say $5,000), then you might consider hiring professional services.

Nature of adjustments suggest you will also be audited for additional years

In keeping with the above point, your overall tax bill might become greater if the number of adjustments made by the auditor for a given year strongly suggest that you are also likely to be audited for additional years. In this case you may have reason to believe that an initial $5,000 tax bill for a single year is about to be multiplied over several years. If you have reason to believe that your tax bill might climb higher, it might make sense to higher professional representation, once you conduct a risk-vs-reward analysis, depending on the kinds of issues under dispute.

Time is money

If you disagree with CRA's reassessment and choose to fight it, then you can either defend yourself or hire professional representation. If you choose to defend yourself, you must consider how much time will be required on your part to do the research and present your arguments to CRA. Although Audit Self Defense helps to reduce the amount of time and effort required on your part to do this, by presenting you with appropriate defenses to the most common CRA arguments, your defense will only be as good as the effort you put into it. If your time can be more profitably spent getting that big contract delivered on time than putting your defense together, then consider hiring professional representation.

Cover your bases

If you have just received an audit letter from CRA, consider hiring a Chartered Professional Accountant to conduct a review of your tax return. This will ensure that you have at least filed your return correctly, and that you will not get stuck on a technicality while you put your defense together and protect your claims.

If you decide to defend yourself

If you've been audited and you choose not to hire professional tax representation, CRA expects that you will either simply pay the bill they send you or make a half-hearted attempt to fight them. CRA is fine with both options, because if you choose to fight without being properly equipped to do so, you will most likely lose, but you will at least have done CRA the favour of allowing the interest on your bill to accrue a little longer.

If you want to successfully counter CRA's attempts to make a piggy-bank out of your business but you don't want to spend thousands of dollars on representation to do it, your only option is to thoroughly inform yourself on the tax issues relevant to your business. Audit Self Defense provides this information in an easy-to-understand, ready-to-use way. See Expense Categories for information relevant to your particular situation.

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Audit Self Defense is committed to making sure you never have to pay more to CRA than you are legally required to, and to making sure you have the tools you need to calmly and effectively deal with CRA if they come calling. Do we want you to win your case? Absolutely! However, Audit Self Defense cannot guarantee successful audit decisions. Nobody can guarantee that.